[OPE-L:2211] Re: New Solution

riccardo bellofiore (bellofio@cisi.unito.it)
Tue, 14 May 1996 11:24:00 -0700

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Hoping not to hurt anybody, I am here again with some funny English and
some funnier political economy.Before I go on with my stupid comments about
my favourite credit theory of exploitation, let me say that the I found the
exchange between Fred and Simon the most intriguing.

I will concentrate here on the issue of variable capital.

I agree with Simon - and hope not to misrepresent him - when he says that
for Marx in vol. I of Capital the wage is advanced in money terms, while
the real wage is paid post factum. It is the advance in money-capital which
buys labour power; this latter has to wait until the end of the production
process to buy wage goods. In other terms, the sequence is:

labour market => production => commodity market

money wage => valorization process => prices of commodities

labour power => living labour => dead labour

For the capitalist class as a whole, the circulating capital (intermediary
goods) exchanged by individual firms cancel each other, hence the only
advance for the firm sector is the wage bill. You can adjust for the
advance of money capital to buy the intermediary goods for the individual
capital. The prices both of capital goods and of consumption goods are set
at the end of the circuit, while the money wage at the beginning.

First question to all the participants to this debate: is your picture
different? That is: when in your model is "opened" the capital goods
market, and when the consumption goods market?

With the forementioned picture of the capitalist circuit in mind, I
understand Andrew as saying that the value of constant and variable capital
is set at the prices determined at the end of the [last] circuit, and is
different from the labour embodied in the elements of constant and variable
capital - more precisely, his capital goods market seems to be opened at
the end of the [previous] period, and the consumption goods market opened
at the beginning of the [present] period. But I may be wrong: then, this is
a *true* question (someone will remember that I made a similar question in
Boston, without any answer then). It is a stupid question? I don't think
anybody may have here two markets for the same commodity in the same
circuit, but let me know.

I understand Simon as saying a different thing: with a money wage,the value
of labour power, that is the labour time bought by the wage, must be
determined starting from the value of money, that is the labour time bought
by a unit of money; this latter magnitude is fixed in fact at the end of
the circuit, when income (wages and profits) will be spent on the commodity
market. Simon says the 'prevailing' value of money: does that mean that we
know the value of money before exchange on the commodity market? Another
true question. If the answer is no, may Chai-on is not so faulty: Marx had
the value of money as given, with lx, before arriving at the py. If the
answer is yes, how? What you know is how many workers are bought by
money-capital - for the capitalist class as a whole the workers for each
unit of the wage bill, which we may translate (given some assumptions) in
the labour time per unit of the wage bill. On this I would agree: but it is
a different value of money than the one I saw in some papers on the new
"interpretation" of the trasformation, so I am a bit puzzled. I call labour
time/wage bill the value of money as capital, and labour time/value added
as wages and profits the value of money as income.

Let me pursue this thread, going back to Marx. Believe in a commodity
money: all problems now disappear. You have the advance of money wages; the
money advanced has a labour content;, hence also the value of labour power
has a labour content - from the start! You have the value of labour power
and the value of money as given before the production process; before
exchange you may even subtract from living labour the labour embodied in
the money wage, and you reach surplus labour. Assume firms produce just
what the market demands. Assume no tendency to the equalisation of the
profit rate. Assume one unit of labour = one unit of money. Whow, it looks
like Capital vol I. Am I wrong?

As you know, I do not believe in the money commodity. The previous was
simply an exercise, just for the record: I think Marx had a different
causality within the circuit than the one Simon put forward. I think also
this causality was important for him. I do not think Marx's construction
can be taken as we read it in his writings, but it is important to know
where and why we depart from it. Otherwise, may be we throw the baby with
the bathwater.

Now, let me go on with a different exercise. Let us have a money-sign,
entirely disconnected from any labour content. The problem resurfaces:
money wage at the beginning of the circuit, and the problem to define the
labour counterpart of the labour power, the 'value' of labour power. I
would say so. The money advanced by capitalists to buy wages is the initial
finance to production. When financing production, entrepreneurs are in fact
deciding how to allocate workers among industries: given the techniques,
and the output they decided to produce, that means that in fact the
capitalist class has decided the quantity of goods they will sell to the
workers - hence, they have decided the real wage to the workers [this
decision, of course, depends by the historical and social circumstances
Simon recalls in passing]. Hence, the capitalist class compell wage workers
to the "necessary labour" and to surplus labour.

We have two ways here: either we say that workers will know the real wage
at the end of the circuit, without any benchmark; or there is a benchmark,
it is the conflictually determined subsistence wage, so that workers expect
that wage and firms in fact sell that amount of wage goods. If the first,
the value of labour power [I would rather call it the price of labour
power, but that's another matter] will be known only at the end of the
circuit. If the second, the value of labour power is known before the end
of the circuit. I think that in fact Marx was consistently thinking in the
second way.

First conclusion: here we have the money wage translated in real terms in a
money setting - as in the simultaneous solution. But for the simultaneists
money appears, when in fact it even appears, at the end. Here money comes
in at the beginning. As in Andrew, though for quite different reasons,
there is a sequence of concatenated acts in the capitalist circuit - even
though prices are set in a simultaneous way! The special nature of the
labour power rightly stressed by Simon - neither a produced commodity, nor
reproduced in capitalist relations - is preserved here.

Second conclusion: the rate of surplus value is here given simply by the
labour embodied in the profit goods over the labour embodied in the wage
goods. It is the same - before and after the trasformation. Why should
exchange ratios change the embodied labour coefficients?

Third conclusion: in the transformation, when there will be prices
divergent from values, then the real wage must be held constant; but it
also must be revalued at the new prices (the same for the initial finance).
Hence, we have *two* values of labour power, in a sense [I would call the
second the 'transformed' price of labour power, but that's another matter].
Simon would be quite right against my picture in replying that when equal
exchange does not hold, the amount of labour *bought* by the wage will
differ from the labour *embodied* in wage goods. So what? That is indeed
the reason why we need two values of labour power, because they do
represent differet things: but the first value of labour power is
independent from prices by construction, why the second is not. The (gross)
profit/ wage ratio, with the numerator and the denominator translated in
labour terms thanks to the value of money as income, cannot be taken as
representing the sharing of the social working day in producing the profit
goods and the wage goods; it does rather represents the share of labour
returning to capitalst over the share of labour returning to workers.

But that would be true in any case, whatever your definitions. And, BTW,
workers are not interested to how much labour is embodied in wage goods, or
how much labour is bought by wage. They are interested in the whole of
living labour they must spend each day, and the use values they consume.

So, I have nothing to say against the new "solution" - which I rather take
as a new "interpretation": in fact, I am a fan of it. Nevertheless, I think
it accouts only part of the story. Capital vol. I is not based on the idea
of equal exchange: it lays the ground for the analysis of the capitalist
process, whatever the exchange ratios.


Riccardo Bellofiore e-mail: bellofio@cisi.unito.it
Department of Economics Tel: (39) -35- 277505 (direct)
University of Bergamo (39) -35- 277501 (dept.)
Piazza Rosate, 2 (39) -11- 5819619 (home)
I-24129 Bergamo Fax: (39) -35- 249975